HomeBuilder: a missed opportunity to fix social housing

The AFR’s Robert Harley has penned an article arguing that the Morrison Government’s HomeBuilder subsidy for dwellings and renovations is a “missed opportunity” to fix the chronic shortage of social housing:

For me, the disappointment is the failure, once again, to address the substantial need for social and affordable housing. Particularly at a time when a Commonwealth government commitment could leverage low-interest rates, spare industry capacity and private sector interest to address the worst undersupply in Australian housing…

“Not including social housing in a housing stimulus package is negligent,” says the chief executive of National Shelter, Adrian Pisarski…

Essential accommodation for those with the lowest incomes and the highest needs is the most undersupplied sector of Australian housing.

National Shelter’s Pisarski estimates the current shortfall at around 500,000 homes.

In the aftermath of the GFC, the Rudd government built 20,000 new homes and brought another 80,000 up to modern standards. Few remember because it was a successful program free of controversy.

It’s an argument also mounted by the Grattan Institute’s Brendan Coates:

…under such schemes [like HomeBuilder], governments also end up giving grants to people who would have bought a home anyway… That’s a lot of spending for little economic gain.

Nor do grants to home buyers actually make housing more affordable. They are typically passed through into higher house prices, which benefits sellers more than buyers. In this case, that is likely to include developers eager to clear their existing stock of both newly and nearly built homes…

Social housing – where rents are typically capped at no more than 30% of household income – provides a safety net to vulnerable Australians.

In particular, the Morrison government should repeat another GFC-era policy, the Social Housing Initiative, under which 19,500 social housing units were built and another 80,000 refurbished over two years, at a cost of A$5.2 billion.

Under the initiative the federal government funded the states to build social housing units directly or contract community housing providers to act as housing developers

Public residential construction approvals spiked within months of the announcement.

Building 30,000 new social housing units today would cost between A$10 billion an A$15 billion. Because state governments and community housing providers won’t have to worry about finance, marketing and sales, they’ll be able to get to work building homes much quicker than the private sector.

The boost to the economy would be pretty immediate.

Just as important, building social housing would also help tackle the growing scourge of homelessness.

Both are 100% correct. Taxpayer funds would be far better spent on building social housing, given:

1. There is a massive homelessness problem in Australia; and
2. Stimulus would not be wasted on people that were going to buy a new home or renovate anyway.

According to research from the Australian Housing and Urban Research Institute (AHURI), Australia was suffering from a critical shortage of 433,000 social housing dwellings in 2016 that would continue to worsen by an additional 727,300 dwellings by 2036 without corrective policy action:

The report estimated that a ten-fold increase in building rates was required to overcome the current social housing shortfall and to cover projected growth in need by 2036. This would require a three-fold expansion of the national social housing stock above its 2016 level.

That is, just to prevent the social housing shortage from getting worse, 15,000 extra dwellings a year would need to be built – over 290,000 homes over the next 20 years. However, to also eliminate the backlog would require an annual social building program of 36,000 units a year – a daunting task.

The big winners from HomeBuilder are large developers, who will be able to inflate the cost of their house-and-land packages, while also clearing their inventory.

It’s another wasteful policy aimed squarely at the Coalition’s property industry mates, rather than Australians in genuine need.